Daily Brief Financials: Hang Seng China Enterprises Index, HSBC Holdings, Juniper Hotels, Bank Mandiri Persero, USD, Alam Sutera Realty and more

• The open interest of the HSCEI 2024 dividend futures is less than half that of the HSCEI 2023 and HSCEI 2022 open interest at the same time of the year.
• Market volatility and the fallout of the losses faced by Korean investors (and the scrutiny of Korean ELS-issuing banks) are among the primary reasons for the low open interest.
• Our fair value for the HSCEI 2024 dividend futures is higher than the current market but there is a lot of sensitivity to bank dividends and special dividends.

• HSBC will release its results on Thursday and there remains risk of far worse credit metrics, not only related to CRE lending in HK and China
• Construction loan risks are tangentially related to CRE and are also considered fairly high risk, where HSBC can see sizable migration to stage 3 loans
• HSBC remains highly concentrated in UK and N America in its wholesale lending book, which we do not believe is well understood, and risky given economies

• Juniper Hotels is looking to raise up to US$217m in its upcoming India IPO.
• Juniper Hotels is the largest owner by no. of keys of Hyatt affiliated hotels in India as of 2Q23 (30th Jun 23), according to Horwath.
• We have looked at the company’s past performance in our previous note. In this note, we provide our thoughts on valuations.

• Bank Mandiri is our top pick for its quality attributes, its premium and growing pre- and post-provision returns; Mandiri provides a better valuations to returns mix than Bank Central Asia
• Bank Negara is the value pick with its low PE multiples, its attractive PEG ratio, whilst also improving pre- and post-provision returns with cost of risk well controlled
• Bank Rakyat registered worsening pre- and post-provision returns in 4Q23, with cost of risk worsening; this reflects its heavily MSME focused loan mix which keeps structural cost of risk high

• U.S. interest rates have been climbing since early January 2024 after reaching their lowest points between December 27th and January 11th.
• For example, the yield on 2-year Treasury bonds has increased by 52 basis points (bps), and the yield on 10-year bonds has risen by 49 bps since their respective lows.
• Similarly, the Dollar Index (DXY), which measures the value of the U.S. dollar against a basket of other currencies, experienced its weakest point on December 28th, 2023.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Alam Sutera Realty
• Citicore Renewable Energy